Chapter 2 - Economics And Economic Systems Flashcards
Opportunity Cost
What you have to give up to get something better.
Sunk Cost
A Cost that has already been concurred and cannot be recovered.
Sunk costs are irrelevant for present and future economic decisions.
Law of Comparative Advantage
The individual, firm, region, or country with the lowest opportunity cost of producing a good should specialize in that good.
Absolute Advantage
The ability to make something using fewer resources than competitors
Comparative Advantage
The ability to make something at a lower opportunity cost than other producers
Division of Labor
Breaking down the production of a good into separate tasks
Specialization of Labor
Focusing work effort on s particular product or single task
Production Possibilities Frontier
PPF
Possible combinations of the two types of goods that can be produced when all available resources are employed efficiently.
Efficiency
The condition that exists when there is no way resources can be reallocated to increase the production of one good without decreasing the production of another. Getting the most from available resources.
Law of Increasing Opportunity Cost
To produce more of one good, a successively larger amount of the other good must be sacrificed.
Economic Growth
An increase in an economy’s ability to produce goods and services
Economic System
Decides what goods and services (GS) are produced How they are produced, and who they are produced for.
Pure Capitalism
Private ownership and no regulation of markets
Pure Communism (command)
Public ownership of resources and state control of markets
Mixed Sytems
A mix between command and capitalist economy. Private and public ownership and regulation of markets.
